Fact Sheet

#63: The Failure of Iran Sanctions

(February 1, 2010)


The entire world seems to agree that Iran should not be allowed to develop nuclear weapons. The principal tactics that have been adopted to prevent Iran from creating a bomb are economic and political sanctions imposed by individual countries and internationally, as a result of the the UN’s adoption of Security Council Resolution 1737. Despite the failure of three rounds of sanctions, Obama Administration officials said in January 2010 they intend to press for a new round of sanctions even as Russia and China continue to balk at the idea.

In December 2008, Iranian Foreign Ministry spokesman Hassan Qashqavi reiterated that “Iran will never suspend uranium enrichment.” Analysts now predict the Iranians could produce a bomb in anywhere from six months to five years. “We haven't really moved one inch toward addressing the issues,” Mohamed ElBaradei, director-general of the International Atomic Energy Agency told the Los Angeles Times. “I think so far the policy has been a failure.” He goes on to suggest the sanctions may have actually been counterproductive. “Many Iranians who even dislike the regime,” ElBaradei observed “[are] gathering around the regime because they feel that country is under siege.”

Reports suggest Iran’s economy is in a fragile state, but this is due more to declining oil prices than to the impact of sanctions. The fact that many UN member nations that supported Resolution 1737 in 2006 continue to trade with Iran has minimized the impact of sanctions and proved to Iranian leaders that UN resolutions and international threats need not be taken seriously. Moreover, Gulf Arab nations that fear a nuclear Iran have lost faith in the West’s willingness to stop the Iranians and have also begun to negotiate deals with Tehran.

Here are just a few examples of how the effort to isolate Iran has been undercut:

  • Chinese state companies began supplying petrol to Iran in September 2009 and now provide up to one-third of its imports.

  • On June 3, 2009, Iran signed a $4.7 billion contract with the Chinese National Petroleum Company to develop part of South Pars, the world's largest reservoir of gas that is shared by Iran and Qatar.
  • German petrochemical company Basell Polyolefine signed a €825 million trade deal with Iran on June 8, 2009 to supply technology to build three plants involving synthetic and plastic material.

  • On September 6, 2009, Venezuelan President Hugo Chavez sealed an agreement to export 20,000 barrels per day of gasoline to Iran.

  • On September 11, 2009, Russian Foreign Minister Sergei Lavrov made clear that Moscow would not be involved in any new rounds of sanctions against Iran in the UN Security Council and dismissed a U.S. timetable for securing progress from Iran on ending its nuclear-fuel program.

  • On November 27, 2008, German and Iranian business leaders began a conference in Hamburg called “Iran Sanctions: Practical Consequence for German Firms.” The purpose of the conference was to improve German business relations in Iran as well as the German and Iranian political relationship.

  • In August, 2008, a German corporation signed a $150 million deal with Iran to build natural gas liquification plants in the country. The German Economics Ministry maintains that the trading of natural gas to Iran does not violate Security Council Resolution 1737.

  • German engineering firm Aerzen secured a 21 million euro contract to supply a steel factory in Esfaham, Iran.

  • German Chancellor Angela Merkel's administration subsidizes investments in Iran by providing German firms with 250 million euros in credit guarantees.

  • Germany's Federal Statistical Office released data showing exports to Iran increased 10 percent over the first three quarters of 2008. Germany's exports to Iran are expected to total 4 million euros this year, close to the record it set in 2004 and 2005. During the first seven months of 2008, the German government approved 1,926 transactions with Iran, a 63 percent increase over last year. This has further cemented Germany's position as Iran's largest trade partner.

  • In April 2007, Austrian oil company OMV signed a 22 billion euro agreement to produce liquefied natural gas from Iran's South Pars gas field.

  • Austria's third-largest bank, Raiffeisen Zentralbank, remains active in Iran and has absorbed the transactions of other major European banks that shut down their operations in Iran.
  • In January 2008, Iran and Italy’s electric company, Edison International, signed an oil exploration deal for $107 million.
  • China has also increased its volume of trade with Iran. Between 2000 and 2005, the amount of Chinese imports into Iran increased by 360%. Iran’s Deputy Minister of Commerce, Mehdi Ghazanfari, predicts that exchanges between Iran and China for the year 2008 will total $25 billion. China also negotiated a $16 billion deal to develop Iran’s northern Pars gas field.
  • Russia's trade relationship with Iran directly ignores the Security Council Resolution. In August 2008, the Russian oil corporation, Gazprom, signed a multi-billion dollar deal to help Iran cultivate its oil and gas fields. French and Japanese oil companies were candidates at one point, but dropped out of dealings with Iran because of international pressure. Russia has also been building a nuclear plant in Iran, which is now expected to begin operating in 2009.

  • Swiss energy giant EGL signed a 25-year deal with the National Iranian Gas Export Company to buy 5.5 billion cubic meters of Iranian natural gas per year, starting in 2011, for approximately $20 billion.

  • Turkey has maintained trade ties with Iran. In 2005, bilateral trade between Iran and Turkey equaled $4 billion, a figure expected to grow to $10 billion in 2008. Iran and Turkey have agreed to continue their relationship and hope to increase their bilateral trade revenue to $20 billion per year.

  • On December 2, 2008, Malaysia signed a $14 billion deal with Iran for the construction of two natural gas liquification plants as well as two gas fields. The two countries signed a multi-billion dollar gas deal in 2007.

  • The Persian Gulf Cooperation Council decided to consider a Free Trade Agreement with Iran. The agreement will lead to economic benefits for the UAE, Saudi Arabia, Qatar and Kuwait.

  • Oman and Bahrain have been negotiating with Iran to buy natural gas.

  • Iran is the United Arab Emirates’ largest non-oil trading partner.

  • Iran retains strong relations with Pakistan and is working on a “peace pipe” that would transfer natural gas between Iran, Pakistan and India.

  • Even the United States has engaged in trade with Iran. According to the Department of Agriculture, Iran has bought more than one million tons of wheat from the United States since the beginning of the 2008-9 crop season.

  • Iranian students study abroad in Germany, France, Canada, Australia and the United Kingdom. The Association of American Universities is seeking to pave the way for a bilateral education program with Iran. University presidents from Carnegie Mellon, Rice, Maryland and Cornell, Florida and UC Davis visited Tehran in November 2008 with the blessing of the U.S. State Department to discuss student exchange programs.

  • Between January and July 2009, trade between the 27 European Union countries and Iran amounted to some €10 billion (about $14 billion).

  • As of January 2010, there were around 1,000 Italian companies active in Iran, including Fiat, Ansaldo, Eni, Danieli, Duferco, and Maire Tecnimont, which signed a €200 million (~$287 million) gas deal with Iran. Other Italian companies, such as Carlo Gavazzi Space, have even equipped the regime's military and contributed to Iran's satellite program.

  • In January 2010, a top Russian arms trade official said Russia still considers Iran a valuable customer for its weapons and that no international agreements bar Russia from selling weapons from Tehran.

All of the aforementioned nations maintain that they are not violating Security Council Resolution 1737. Trading with Iran and importing goods from the country cannot, the countries claim, contribute to Iran's threat of creating a nuclear bomb. Any investment in Iran, however, bolsters its economy and provides revenues that can directly or indirectly (by freeing up other resources) be used for nuclear weapons development.

Iran might not be discouraged from its goal of producing nuclear weapons by total compliance of all nations with existing sanctions, or even stricter sanctions, but it is evident that the present weak, unenforceable and widely ignored policy has not had the desired effect.


Sources: The U.S. State Department; Wikipedia; Reuters; Fars News Agency; European Jewish Congress; NewsBriefsOman; AFP, (August 25, 2008); Los Angeles Times, (December 6, 2008); Reuters, (December 9, 2008); The Wall Street Journal (February 6, 2009), (September 11, 2009), (January 14, 2010); Gulf in the Media; Jerusalem Post (June 11, 2009), (January 28, 2010); The Associated Press (September 8, 2009); Financial Times, (September 23 2009); Ynet (January 28, 2010)

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